CPA a big stick for errant retailers
25 March 2020 | Web Article Number: ME202018519
The Consumer Protection Act (CPA) has been seen primarily through the lens of consumers. However, very little focus has been placed on its impact on retailers, writes Dr Marlini Nair-Moodley, an academic at private higher education institution, MANCOSA.
WHILST retailers in South Africa are complying with the provisions of the CPA, there is a significant impact on the promotion expense in the organisation.
Implementation of new methods of promotions in order to be compliant has resulted in increased promotions expenditure of between 10 and 20%.
Retailers also incur added administrative costs since they have to carry more stock, even before they commence with a promotion, due to the restrictions placed by the CPA. They are unable to advertise the items on sale if they physically do not have the stock. For a small business, this could mean thousands of rand’s worth of stock must be ordered, before the advertising commences, with the hope of the stock being sold. Businesses also incur added insurance costs to cover the loss and theft of stock.
They need to continually find new methods of increasing their databases so that customers constantly view their promotions, resulting in additional promotional costs. Retailing is further impeded by the implied warranty, which allows consumers to return faulty goods and get the seller to repair it, replace it or get a full refund within the first two weeks.
Returns to suppliers are costly to administer and it can be quite challenging for the retailer to track and provide feedback to the customer, since the entire returns process could take several months to be finalised.
The act also restricts how businesses market themselves and approach customers.
The CPA has resulted in increased standards in all spheres of marketing and business practices to ensure that all parties that transact (suppliers, importers, exporters, wholesalers, manufacturers and customers) are not compromised in any way.
Currently, the CPA gives content to consumer protection by providing for, amongst other things, protection against discriminatory marketing, the right to restrict unwanted direct marketing, the consumer’s right to a cooling-off period after direct marketing, the right to information in plain and understandable language, the disclosure of the price of services, the prohibition against unfair and unjust contract terms, and the need for written consumer agreements.
It was imperative for the CPA to be enforced to assist historically disadvantaged persons to fulfill their rights and to promote full participation as consumers. They did not have access to specialised knowledge and did not receive the support of lawyers or specialists.
With significant levels of poverty and unequal distribution of income, high legal costs may have presented a barrier to justice. The more susceptible consumers are, the more protection is required.
The preamble of the CPA acknowledges the reality that many South African consumers are poor, illiterate and live in rural areas; are minors, seniors or other similar vulnerable consumers.
After the scrapping of Apartheid laws, customers were not prepared to settle for sub-standard goods and services. During the transformation, Black customers in South Africa have become more discerning. Even though many people in South Africa lived in rural areas, they also possessed cellular phones.
The impact of this factor caused a definite shift in the way marketing was carried out to cater for the needs of rural communities as well. The fact that the majority of the population was accessible daily via email and SMS, led to a change in marketing methods to capitalise on the fact that people were online at all times. Armed with more information, customers have become more sophisticated and demanding.
The CPA is multi-faceted and ensures that consumers are able to make informed purchasing decisions; that a variety of products and services can be accessed; that the marketing and selling practices are based on sound principles; have efficient redress; and are well-informed about their rights and responsibilities. The customer became the focus in the transaction and the balance of power no longer lies in the hands of the retailer.
By ensuring adequate standards of goods and services, the CPA has forced businesses to become more responsible in terms of providing such services. The CPA now provides for a much broader mechanism to protect consumers and applies to all forms of promotions conducted by retailers.
Apart from the fact that businesses have to comply with the act to avoid penalties, a competitive advantage can be gained. The competitive advantage is a by-product of trust and satisfaction from fair purchases which in turn results in consumer loyalty. Consumer loyalty results in more positive word –of-mouth referrals, leading to more consumer spending. Therefore, businesses that emphasise that they are CPA compliant will benefit from this Act.
Businesses are indeed becoming more socially responsible and it is envisaged that consumers' perceptions and expectations of businesses' ethical behaviour will be vital determinants of market share and sustainable growth. If customers perceive a business to be compliant with all the applicable legislation, and are socially responsible, then the business is positioned better in the marketplace as customers want to deal with them.